How to Start a House Flipping Business – Brick-by-Brick

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How to Start a House Flipping Business – Brick-by-Brick

May 1, 2015

By Tarek El Moussa

Over the past few years, a lot of people have asked me how to start a house flipping business. After all, you probably already know that Christina and I started flipping houses after the housing bubble burst in one of the worst real estate markets in history.

The thing is, it’s really not that hard to flip a house, even in a terrible market, if you know what you’re doing. Without getting into as much detail as would be covered in a Success Path Education workshop, here are the basic steps for starting your own house flipping business.

Figure Out How Much It’s Going to Cost

Before you go looking for funding, you need to have a good idea of what it’s going to cost to get started. You need to know what investment properties are selling for in the area where you’re thinking of buying, and you need to know an approximate cost for rehab, as well as the costs associated with getting it on the market and ready to sell.

Find Funding

Next, it’s time to find your investment capital. You won’t be using any of your own savings to invest. Instead, you’ll be partnering with an investor or getting a loan. You’ll need to factor in your investor’s share of the profits or the lender’s fees and/or interest when you figure out how much you can spend on a property and how much you can devote to rehabbing it.

Assemble Your Real Estate and Rehab Teams

Once you have funding, you’ll know what your basic budget is. Operating on the 70% rule, start interviewing inspectors, realtors, and general contractors. Basically, according to the 70% rule, you should only spend 70% of your home’s ARV (after renovation value) on purchasing and rehabbing it. That includes paying your team to help you through the process.

Make Sure You’re Up to Code

Before you even look at a single property, do some research on local laws and regulations. In some states you may be required to be licensed as a realtor or as a general contractor to start flipping houses. Make sure that you’re operating within the boundaries of the law before you make any purchases.

Find Properties and Start Flipping

Finally, you’ll be ready to take on your first flip. Now you just have to find it and buy it. Easy, right? Well, yes and no. I love this part, but it does take some work and patience. You have to find a house in a neighborhood that’s going to have a good market without too many vacancies. And the house has to have real market potential. Don’t jump at the very first property you find, or you might regret it when you find out it’s a real flop.

So there you go! Without sitting through a real estate workshop, that’s the short version of how to start a house flipping business. Once you get started, flipping houses gets easier and more fun, even when you have to flip a house that’s had feral animals running around in it or has had all the windows smashed out…

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Tarek El Moussa

Tarek and Christina El Moussa have over a decade of professional real estate experience and have been featured in national print publications, online media outlets, and a popular real estate TV show. Tarek is known for his determination to get the job done and doing it right.